TOKYO, March 11 (Reuters) - The dollar held near multi-yearhighs against the yen on Monday after surprisingly strong U.S.labour data, but demand for riskier assets was curbed by a mixedbag of Chinese data which pointed to a patchy recovery in theworld's second-largest economy.

Commodities prices were caught between growing optimismabout more solid demand as the global economy improves and thestrengthening dollar, which makes dollar-denominated commoditiesmore expensive for non-dollar holders.

European markets were seen edging higher, with financialspreadbetters predicting London's FTSE 100, Paris'sCAC-40 and Frankfurt's DAX would open up about0.1 percent.

The MSCI's broadest index of Asia-Pacific shares outsideJapan held steady but was weighed down by a 0.1percent drop each in South Korean shares and Shanghaishares.

Chinese economic indicators released over the weekendsignalled a looming dilemma for policymakers, as inflation stoodat a 10-month high in February while factory output and consumerspending were weaker than forecast.

"China's macro picture is getting better but there's still alot of uncertainty, especially on the details of the publicpolicy to be released this week," said analyst Bonnie Liu ofMacquarie in Shanghai.

Australian shares rose 0.5 percent, hitting a fresh4-1/2 year high led by financials after the Dow Jones industrialaverage posted its fourth consecutive record high closeon Friday, but weaker metal prices hit mining companies. Thecommodity-linked Australian dollar eased 0.1 percent to$1.0221.

In Seoul, investors were jittery amid intensifying tensionswith North Korea and as further weakness in the yen threatensSouth Korean exporters.

The yen's slide bolstered Japanese equities, with the Nikkeistock average closing up 0.5 percent after hitting afresh 4-1/2-year high.

FUNDAMENTALS BOOST DOLLAR

U.S. nonfarm payrolls jumped by 236,000 jobs last month,above forecast for a 160,000 gain, while the unemployment ratefell to a four-year low of 7.7 percent from 7.9 percent.

The data was unlikely to prompt the Federal Reserve tochange its policy settings anytime soon as the U.S. central bankhas said it will keep its near-zero rate stance until theunemployment rate falls to 6.5 percent, as long as inflationdoes not threaten to top 2.5 percent.

But brighter growth prospects underpinned the dollar.

"As both Europe and Japan look to continue with easymonetary policy, improving economic indicators in the UnitedStates make it likely that the U.S. would be the first to departfrom global accommodative conditions, putting upward pressureson yields and supporting the dollar," a senior official at aJapanese institutional investor said.

"It's too early yet to say the current dollar buying basedon solid U.S. fundamentals is sustainable. Effects from U.S.spending cuts may start to weigh on growth later on andundermine the dollar," he said.

The dollar was up 0.1 percent against the yen at 96.06, near Friday's peak of 96.60 yen, its highest sinceAugust 2009. The euro was trading up 0.2 percent at124.98 yen, off a high of 125.98 yen touched on Friday.

"Much of the recent move in the U.S. dollar is a reflectionof more fundamental money flows out of the yen and out of theeuro concurrently, and that is enough of an effect -- a trulymassive effect -- to nudge the dollar higher," said RichardHastings, macro strategist at Global Hunter Securities.

"This is of course a big change from forex conditions yearsago."

Currency speculators boosted their bets in favour of theU.S. dollar in the latest week to the highest in over sevenmonths, while also raising short positions in most other majorcurrencies, such as the yen, the euro and sterling, data fromthe Commodity Futures Trading Commission showed on Friday.